I

A Project Report

On AXIS BANK

Submitted in Partial Fulfillment of the Requirement for the Degree of Master of Business Administration

Gautam Buddh Technical University, Lucknow Project Guide

Mr. Somesh Sharma ( Project Guide)

Submitted By
Divya Jyoti Rajput R.NO-0801514415

TO WHOM IT MAY CONCERN

This is to certify that Mr. /Ms --------------------------------------------student of MBA III Semester in our institute has successfully completed his/her summer training project entitled ------------------------------------------------------------------ for the partial fulfillment of the Master of Business Administration degree.

(Name of the Director) Director IIMS/IIET

(Name of Project Guide) Project Guide

ACKNOWLEDGEMENT

Every work requires a diligent effort not only on the part of the person directly involved in the successful completion of the work but also the ones who are willing to help and guidance. In the same regards, I would like to thank my Faculty Guide, Mr.Somesh Sharma who has been a constant support in the working of the project.

Furthermore, I would like to express my gratitude to the employees of Axis Bank who helped me towards the successful completion of this dissertation and without whose help, the completion of this report would not have been possible.

(DIVYA JYOTI RAJPUT)

TABLE OF CONTENTS
Chapter 1: Introduction
Introduction to Retail Banking

Chapter 2: Objectives and Methodology

Chapter 3: Case- Axis Bank

Distribution Strategies Product centric Strategies Axis bank Branding y y y Accounts Internet Banking Mutual Funds

Chapter 4: Innovations by other banks

Accounts Credit Cards Internet Banking

Mobile Banking

Chapter 5: Customer Preference Survey

Recommendation

Chapter 6: Conclusion

Chapter 7:

INTRODUCTION

Retail Banking
Retail banking is typical mass-market banking where individual customers use local branches of larger commercial banks. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so forth.

Before Internet era, consumers largely selected their banks based on how convenient

the location of banks branches was to their homes or offices. With the Advent of new technologies in the business of bank, such as Internet banking and ATMs, now customers can freely chose any bank for their transactions. Thus the customer base of banks has increased, and so has the choices of customers for selecting the banks.

This is just the beginning of the story. Due to globalization a new generation of private sector banks and many foreign banks have also entered the market and they have brought with them several useful and innovative products. Due to forced competition, public sector banks are also becoming more technology savvy and customer oriented.

GROWTH IN RETAIL BANKING

Bankers have been increasingly shifting focus to retail banking to increase profitability and reduce delinquency rates. Customer shifting, cost pressure and increased competition are some of the reasons for this shift in focus. Retailing is now favored because of better norms, lesser asset quality problem and low NPA. Further it offers many opportunities and potential for credit expansion.

The size of the retail market is Rs 50,000 crore which includes credit card spending of Rs10,000 crore. The markets for the other goods are Housing loan at Rs 25,000 crore (30% CAGR), Personal Loan at Rs 4000 crore (10-15% CAGR) and auto loans at Rs75,000 crore (5% CAGR) Moreover, Non-traditional competition, market consolidation, new technology, and the proliferation of the Internet are changing the competitive landscape of the retail banking

industry. Today retail banking sector is characterized by following: y Multiple products (deposits, credit cards, insurance, investments and securities) y y Multiple channels of distribution (call center, branch, Internet and kiosk) Multiple customer groups (consumer, small business, and corporate)

Today, the customers have many expectations from bank such as (i) Service at reduced cost (ii) Service Anytime Anywhere (iii) Personalized Service With increased number of banks, products and services and practically nil switching costs, customers are easily switching banks whenever they find better services and products. Banks are finding it tough to get new customers and more importantly retain existing customers.

According to a research by Reichheld and Sasser in the Harvard Business Review, 5% increase in customer retention can increase profitability by 35% in banking business, 50% in insurance and brokerage, and 125% in the consumer credit card market. Therefore banks are now stressing on retaining customers and increasing market share.

What do the banks need ?

The banks now need to find out what to sell, whom to sell, when to sell, how to sell and how to be different to increase profitability. Banks need to differentiate themselves by adding value-added service, offerings and building long-term relationships with their customers through more customized products, enhanced value offerings, personalized services and increased accessibility. Banks also need to identify customers and products that would be most profitable and target customers with products that are most appropriate to their needs and serve the customers with greater cost efficiency. Banks also need to find out the avenues for increased customer satisfaction, which leads to increased customer loyalty. This may be explained better from two initiatives bank took in the past: 1. Earlier what drove many bankers to invest in ATMs was the promise of reduced branch cost, since customers would use them instead of a branch to transact business. But what was discovered is that the financial impact of ATMs is a marginal increase in fee income substantially offset by the cost of significant increases in the number of customer transactions. The value proposition, however, was a significant increase in that intangible called customer satisfaction. The increase in customer satisfaction has translated to loyalty that resulted in higher customer retention and growing franchise value.

2. Bankers invested in Internet banking, believing that the Internet was a lower-cost delivery channel and a way to increase sales. Studies have now shown, however, that the primary value of offering Internet banking services lies in the

increased retention of highly valued customer segments. Again customer satisfaction drives the value proposition.

Thus, banks need to retain existing customers with enhanced personalized services and products, which best suits their needs and satisfies them the most.

Potential for Retail in India: Is sky the limit?

The Indian players are bullish on the Retail business and this is not totally unfounded.

There are two main reasons behind this. Firstly, it is now undeniable that the face of the Indian consumer is changing. This is reflected in a change in the urban household income pattern. The direct fallout of such a change will be the consumption patterns and hence the banking habits of Indians, which will now be skewed towards Retail products. At the same time, India compares pretty poorly with the other economies of the world that are now becoming comparable in terms of spending patterns with the opening up of our economy. For instance, while the total outstanding Retail loans in Taiwan is around 41% of GDP, the figure in India stands at less than 5%. The comparison with the West is even more staggering. Another comparison that is natural when comparing Retail sectors is the use of credit cards. Here also, the potential lies in the fact that of all the consumer expenditure in India in 2001, less than 1% was through plastic, the

corresponding US figure standing at 18%.

But how competitive are the players?

The fact that the statistics reveal a huge potential also brings with it a threat that is true for any sector of a country that is opening up. Just how competitive are our banks? Is the threat of getting drubbed by foreign competition real? To analyze this, one needs to get into the shoes of the foreign banks. Going by international standards, a large portion of the Indian population is simply not bankable taking profitability into consideration. On the other hand, the financial services market is highly over-leveraged in India. Competition is fierce, particularly from local private banks such as HDFC and ICICI, in the business of home, car and consumer loans. There, precisely lie the pitfalls of such explosive growth. All banks are targeting the fluffiest segment i.e. the upwardly mobile urban salaried class. Although the players are spreading their operations into segments like self- employed and the semi-urban rich, it is an open secret that the big city Indian yuppies form the most profitable segment. Over-dependence on this segment is bound to bring in inflexibility in the business.

What about the foreign giants?

The foreign banks have identified this problem but there are certain systematic risks involved in operating in the Retail market for them. These include regulatory restrictions that prevent them from expanding their branch network. So these banks

often take the Direct Selling Agent (DSA) route whereby low-end jobs like sourcing or transaction processing are outsourced to small regional layers. So now on, when you see a loan mela or a road show showcasing the retail bouquet of an elite MNC giant, you know that a significant commission earned out of any such booking gets ploughed back to our own economy. Perhaps, one of the biggest impediments in foreign players leveraging the Indian markets is the absence of positive credit bureaus. In the west the risk profile can be easily mapped to things like SSNs and this information can be publicly traded. PAN is a step in this direction but lot more work need to be done. What has been a positive step towards this is a negative file sharing started by a consortium of 11 banks. However, as a McKinsey study points out actual write-offs on NPAs show a strong negative correlation with sharing of positive information. On top of this, the spend-now-pay-later credit culture in India is just not picking up. A swift legal procedure against consumers creating bad debt is virtually nonexistent.

Finally, the vast geographical and cultural diversity of the country makes credit policy formulation a tough job and it simply cannot be dictated from a Wall Street or a Singapore boardroom! All these add up to the unattractiveness of the Indian retail market to the foreign players. So over the past few years, in spite of the entry of MNCs in many industries, Retail Banking has seen a flurry of panicky exits. Fewer than 40 remain in India and their share of total bank assets currently 7.2% is falling. Those that remain might be thought to be likely buyers of Indian banks. Yet Citibank, HSBC and Standard Charteredall in India for more than a century, and

with relatively large retail networksseem to have no pressing need to acquire a local bank. Established foreign banks have preferred to take over customers or businesses from other foreign banks that want to leave. Thus HSBC, in recent years, has acquired customers from France's BNP, Germany's Deutsche Bank and Japan's Bank of Tokyo-Mitsubishi. ABN Amro took over Bank of America's retail business.

So all for the keeping then?

This will perhaps be the most wrongful inference that can be drawn from the above. We just cannot afford to look inwards and repeat the mistakes that were the side effects of the nationalization of the Banking System. A growing market can never be an alibi for lack of innovation. Indian banks have shown little or no interest in innovative tailor-made products. They have often tried to copy process designs that have been tested, albeit successfully, in the West.

Each economic culture has its own traits and one who successfully adapts those to the business is the eventual winner. A case in point is the successful implementation of micro-credit networks in Bangladesh. Positioning a bank as a tech-savvy financial vendor in a country where Internet penetration is an abysmal 1.65% can only add to the over-leveraging as pointed out earlier. The focus of the sector should remain in

macroeconomic wealth creation and not increasing the per capita indebtedness that will do little but add to the NPA burden. Retail Banking in India has to be developed in the Indian way, notwithstanding the long queues in front of the teller counter in the SBI Joka branch.